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President Signs Bill Increasing EITC Due Diligence Penalty

President Barack Obama signed into law Friday a trade agreement with
South Korea (HR
3080) that increases from $100 to $500 the Sec. 6695(g) penalty
for failure by preparers to exercise due diligence with respect to the
earned income tax credit (EITC). Under another provision of the
agreement, the IRS will receive detailed information about federal and
state prison inmates.

The EITC penalty applies to each failure of a tax return preparer to
exercise due diligence in determining taxpayer eligibility for, or the
amount of, an EITC. The increased penalty amount will apply to returns
required to be filed after Dec. 31, 2011. Earlier this month, the IRS
proposed new regulations (see “IRS Proposes Stiffer
Preparer Requirements for EITCs”) that would also add new due
diligence requirements and procedures for the refundable credit. The
proposed regulations would require preparers to submit an EITC
eligibility checklist to the IRS in addition to keeping it in their
records, as is currently required. The proposed regulations would also
make preparers’ firms as well as individual preparers potentially
liable for the penalty.

The Korea trade act also requires the Federal Bureau of Prisons and
state prison administrative agencies to send the IRS annually a list
of all inmates incarcerated in the prison system at any time during
the previous two calendar years and the first eight months of the
current year.

All three trade acts also accelerate the amount of corporate
estimated tax due by corporations with $1 billion or more in assets,
by a combined increase of 0.5% for the third calendar quarter of 2012
and 3.5% for the third quarter of 2016. Affected taxpayers may reduce
their estimated tax payments for the following quarter by the same amount.

TAX NEWS

President Barack Obama signed legislation that retroactively extended more than 50 expired tax provisions for 2014, allowing taxpayers to take advantage of a host of tax incentives during this filing season.

A weekly snapshot of global accounting with news from the Journal of Accountancy and other leading accounting publications. It includes summaries of what matters to you, written by expert editors to save you time and keep you informed and prepared.